Lazy Man’s Scam Scale

When I was writing about why you shouldn’t trust the Better Business Bureau (BBB), I got an interesting comment from Contrarian about something else consumers should know: city specific magazines hire sales people to contact companies directly and sell their “Best of” rankings for a price.

I didn’t know that was true, and I don’t have any evidence to back it up, but Contrarian has been spot on with his analysis on any of things in the past. More important than that though, it simply makes sense. There are a lot of consumers that use those those “Best of” rankings to make their purchasing decision. It wouldn’t surprise me if Boston magazine realized that space in its Best of Boston was a valuable commodity and tried to capitalize on it as such. I’m not saying that they do that and again, I have no evidence, but I’m just saying that it isn’t just plausible, it seems probable to me.

Similar to that though, I heard two separate people who don’t know each either, tell me of businesses that have gotten what seems to amount to extortion from Yelp. They said that their bad reviews were at the top of the page and that for a fee (perhaps combined with an advertisement, I can’t remember), the company would feature some of the better reviews ahead. One person told me that they her friend wrote a $3000 check on the spot. The other business owner declined. One of the stories is at least a few years old now and I can’t say that Yelp as a publicly traded still works that way. Yelp’s site today says the default sort doesn’t take into account advertising.

I took Contrarian’s Best of [City X] example and applied it to the advertisements that you see in the airplane magazines for the best steakhouses and best doctors. It’s very clear to me that they are advertisements, they even have the advertisement size box on the page instead of a full article written by someone reputable. Rational Therapeutics has an article about being approached to be featured in such an advertisement. This is an obvious advertisement to me, even though the magazines claim to vet the paying doctors and steakhouses, but Energi Gal mentions that she falls for it occasionally and as a very successful pharmacist she’s pretty bright.

My argument was that this the airplane magazine/best steakhouse scam was pretty easy to spot and the BBB being untrustworthy was not. Then Contrarian suggested that MLM is a pretty obvious scam. I personally don’t believe it is quite obvious. If it were, I wouldn’t have 6,000 comments on my MonaVie article with people claiming that the fruit juice cured every medical condition under the sun. If it were such an obvious scam, you’d think there wouldn’t be 15 million Americans caught up in it.

This gave me an idea: we need to have a scam scale. I’m thinking something along the Mohs scale of mineral hardness, but it would clearly be more subjective and less objective. Maybe I could make it scientific by allowing people to vote. I get the feeling that it wouldn’t work, because people with a vested interest in MLM say that it isn’t a scam at all.

In developing this scam scale idea, I determined there are two main factors going into the scam:

How devious / cleaverly disguised the scam is…

… and how much the scam is going to harm you

While I’m personally very interested in the more devious scams, I have to admit that if they aren’t going to hurt you, they aren’t that bad. For example, if you go to one of steakhouses listed in the airline magazine as one of the best, you are most likely to still get a decent steak for your money. On the other end of the spectrum, if you gave your life savings to Bernie Madoff to invest, you may find that you lost it all. That’s a pretty harmful scam. (It’s devious too, since most people had no way of really knowing he was running a pyramid scheme.)

With that in mind, I’ve decided to rate a scam on a scale of 1 to 10 in deviousness and harmfulness. I take the deviousness score and add it to twice the harmfulness score and divide by three. This gives extra weight to the scams that are more harmful. I took a few of things that I consider scams and put a subjective ranking to them and put them in a nice table sorted by Scam Score:

I put the old-fashion X-Ray specs that kids bought in the 1950’s as very small scam. I hope few adults actually thought they were getting glasses that could see through things. In the worst case you were out a few dollars and moved on with your life. I view male enhancement pills in the mold, I hope most adults know better than to expect them to work, but at least you aren’t typically out too much money. I thought the Best of [City X] is a little more devious, because it isn’t obvious to the consumer that sales reps may or may not have sold off the position for best BBQ restaurant in town.

You’ll see that in the 7.5 – 9 range, I have various multi-level marketing companies. I think they are particularly devious as they often pitch themselves as legit business opportunities when over 99% of people lose money in them and their products are often claimed to be of a higher quality than they are. Some of them like ViSalus will give people an incentive to take out a big BMW lease in their own name and then stick them with that burden if their sales drop… a very devious scam in my view. MonaVie is particularly devious in trying to convince consumers that two ounces of their juice is equal to eating 13 fruits and vegetables – I can’t tell you how many distributors fall for that.

All these MLMs are fairly harmful because month after month you lose money buying overpriced product in hopes of business opportunity that isn’t there. In the case of MonaVie, it is $1600 a year in just juice… and this doesn’t factor in other costs of running the business which can run 5 times that. In the case of MonaVie some people actually stop taking their medication, which is harmful in more than just a monetary sense.

Now it’s your turn. What other scams should I include on the scale? Do you agree with my ratings or not? Finally, feel free to point me to scam scale that already exists. That’s par for the course as most of my good ideas are already implemented elsewhere.

Last week, I mentioned that I was going to try to get to the ZeekRewards scam this week. Unfortunately, life intervened and I had to go with this post that you just read, because it didn’t require 20 hours of research beforehand, like the ZeekRewards article does.

You may have noticed in this table, I put the “paid bid auctions” in there. That’s in anticipation of the ZeekRewards thing.

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